Monday, 27 February 2017

SCALING THE GETTING OUT OF DEBT PYRAMID

Being free of debt has to be one of the best feelings because you don’t have payments hanging over your head. You are no longer looking at a paycheck as a payment source. Instead, you can think about saving up or buying something. Your outlook about work even changes because you may even try something new, knowing your paycheck isn’t reserved for the debt that weighs heavy.

While it all sounds good, the real challenge is figuring out how to scale the getting out of debt pyramid and reach that pinnacle of freedom. While it may seem like you have the Mount Everest of Debt, following a certain fiscal regimen of addressing that debt will get you up and over that barrier. Here’s how.

Commit to Getting Out of Debt

While you may want the debt to go away, it takes more than wishing. You have to make a decision and commit to getting out of debt. It has to be all in. That means not using any more credit cards or other debt vehicles. This commitment also involves going without some things you might have been used to, such as eating out or buying those new shoes. You have to be fiscally disciplined and leave your consumption lifestyle behind at all costs.

Maybe there is something larger ahead that you really would like to have so you can focus on that as a way to commit to scaling the getting out of debt pyramid. It could be a car or it could even be a vacation or buying a new house. Whatever you think it is that might keep your eyes on that prize is a great way to move beyond the short-term “I gotta have it so I’ll finance it” mindset.

Prioritize the Debt

The next step is to decide what to pay off first as you most likely have more than one creditor eating away at your monthly cash. Start with the smaller debts first because you can get those payments down and out of the way much faster and then free up more money to attack the larger debts.

Create a Realistic Budget

At the base of your getting out of debt pyramid should be the framework for tackling this debt and keeping you out of debt in the future. The best way to do that is to create a realistic budget that helps you make the smart money decisions. As part of prioritizing the debt, you most likely made a total of all that is owed. You need to put this against your regular bills and your monthly income to see what is there to use for the debt and daily expenses.

Just be prepared for the fact that your realistic budget may not have any room for “the extras” for a while, including eating out, going to the movies, or hitting the sales racks. You may even need to cut back what you spend on groceries as well to really attack the mountain of debt.

This is where discipline becomes central to climbing that getting out of debt pyramid. It’s a tough climb out but if you stick to it, you can realize your goal and then have the freedom to alter your budget for new goals, including saving money and paying cash for those “extras.”

Go On the Offensive with Debt

Rather than be defensive about your debt, climbing the getting out of debt pyramid means going on the offensive by taking action. This action includes finding ways to reduce interest rates on debts by negotiating with your creditor. If that doesn’t work, then you can also consider moving the debt to a zero percent interest rate. Usually, these are introductory rates that end up buying you some time to make your payments mean more and dig deeper into the amount owed. Get it paid off before the promotional no interest period runs out.

Find ways to earn extra cash to apply directly to your debt. Use a tax refund, take on a second job, or further reduce your monthly spending habits. This extra effort to compile cash for larger payments will definitely pay off in the form of a lower debt, less interest, and faster path to financial freedom.

Think Differently about Spending

While you are climbing the getting out of debt pyramid, it’s also the time to change how you think about spending money. Learn to live without credit cards by giving them up altogether. Use cash and then you will understand how far it goes and what living within your means really entails. While doing this, you will come out on top of the pyramid having slayed the impulse purchase habit. Plus, you might even start to understand the value of creating a savings account, an emergency fund, and more money for those bigger things like a house or retirement.

It’s a tough pyramid to climb but well worth it when you are able to place your flag in the top and say you have conquered debt for good. You will experience the exhilaration of financial freedom and never want to go back to the bottom of the getting out of debt pyramid again.